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Episode 13, we devote this episode to Lego, the Danish firm has committed four million dollars to fighting racial injustice.

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I slipped and fell on six Lego horses and unfortunately, they went up my ass. I had to go to the emergency room. He said, bad news. You have Lego horses up your ass. The good news is they are stable.

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Getting more stable. Oh, my gosh, how inappropriate, but it's Episode 13, Rob.

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Today on the pod, we're speaking with Dorothy Brown, a professor of law at Emory University. She's a recognized scholar and tax policy, race and class and has published extensively on the racial implications of federal tax policy. She joins us today to contextualize what's going on concerning the protests and where the country goes from here. After that conversation, we'll have office hours and wrap up with our algebra of happiness. OK, let's talk about the news. The S&P 500 has erased its 20 20 losses.

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It's escalated more than forty four percent since its March lows and Nasdaq hit an all time high.

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What the fuck?

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The World Bank says the global economy shrank or will shrink by over five percent in 2020, and yet the market is at an all time high. What is going on here? I have some thoughts. I have some thoughts, some not so surprising, some sort of surprise. So first off, when we talk about the NASDAQ and the S&P, one of the worst things we can do is assume that this is a proxy for the broader health of the economy.

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It's forward looking. It's meant to be a reflection of who we are as a people, but it is not or no longer. It really is an accurate indicator of what is going on in the broader economy. Why? Because when you're talking about publicly traded stocks, first off, you're talking about half as many companies is just 20 years ago and something like a third as many 30 years ago because of mergers and acquisitions or companies going out of business.

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When you talk about publicly traded stocks, you're talking about the best performing companies, sort of the best of the best. And you're talking about companies with access to capital. And where are those companies on the NYSE and on the Nasdaq? So the markets have hit all time highs.

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There is a total detachment now from the stock market and that kind of main street economy.

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The other less obvious, the other less obvious trend that is taking place here. That is just fascinating.

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I mean, blow your mind kind of fascinating is that we love to gamble. There's a dope ahead when the you know, the slot machine is about to stop. It's fun to bet it's something we've done for a long time. I'm not entirely sure what instinct that calls on, but effectively what has happened is think about this. There has been an enormous destruction and supply of opportunities to gamble. Can't go to Vegas, to Doug would be in Vegas.

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I am such a better version of me in Vegas.

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I typically like to dress up. I wear some crazy midlife crisis, canary yellow jacket. I sometimes wear a kilt, the dog has a kilt and I break it out when I'm in Vegas. Great conversation starter. Great conversation starter. Vegas is out. No one's in Vegas or very few. And and think about this. There's been a total destruction in sports. Meaning? Meaning one of the biggest industries in the shadow economy. Sports betting has gone away.

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So where can you bet? Where do you have to do research, make calculated risk, make a bet and get that dope ahead, hit that that primal sensor of winning or losing, you guessed it, the stock market.

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The number of new accounts reported by TD Ameritrade, by Schwab, by Robin Hood has skyrocketed. So we've seen an entirely new cohort enter the market. The retail market may be driving or these speculators, these gamblers, there's people that would be at the horse track or in Caesar's casino book or whatever they call it, where they bet on sports or call their bookie are now betting on stocks. And supposedly the professional investor class is on the sidelines because they're just I don't get it or they don't understand how this has happened.

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Is that sustainable? What happens to stocks? I don't know. According to CNBC data track, between May 30 and June six shows, Biden spent over or approximately five million on Facebook ads and Trump spent about one point two million. Supposedly the controversy or the civil unrest, I don't know what the correct term for it is has sparked a wave of giving across Democratic candidates. And obviously, Democrats are excited that the handling, if you will, if you can even call it that of both the pandemic and the civil unrest, is not shared.

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The current administration are good, like Democrats are trying to take advantage of it. Speaking of Facebook. Speaking of Facebook, I think the perfect description for Mark Zuckerberg or the new moniker from Mark Zuckerberg is that he is the world's most successful oligarch.

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What is an oligarch? An oligarch as someone who uses their proximity or exploits their proximity to power to garner massive wealth in a corrupt manner. We think of oligarchs in Russia where I become close to Putin. I give him or her 10 percent. Supposedly, Putin is the wealthiest man in the world, 10 percent of my profits that are ill. Gain by getting Putin to basically shut down my competitors or some other form of corruption, that is kind of the definition of corruption, if you will, and that is state sponsored theft.

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What do we have here? The mother of all unholy alliances where the orange man has decided, the orange man? That's a little disparaging. Why don't we just come orange Hitler? By the way, I do think there are some appropriate analogies. And I think it's time to start comparing Donald Trump to Hitler, his own police force, the use of a new medium similar to Hitler use radio demonization of immigrants, a refusal to condemn violence against one's perceived political threats.

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I don't. I don't. And everyone says it couldn't happen here, just as we said, oh, oh, the virus can't get here. We're just too fucking cool. We're too awesome for the for the virus to actually come here. And now, the virus didn't get the memo on how exceptional America is, just as we didn't think that could happen here. There's a notion that somehow what happened in the middle of the 20th century in Europe couldn't happen.

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There sure could happen here. Look at Germany, pre World War to a very advanced society, incredibly culturally rich, incredible technology and a massive appreciation for the arts and culture. And then a madman took advantage of economic strife and convinced an angry populace that we should begin rounding up people all week. We'd never round up people. Yeah, we did. We did it when your grandparents were alive. It was called internment camps, where we put Japanese Americans behind barbed wire for no other reason than they they were Japanese.

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Anyways, I do think it's time to start openly and honestly asking ourselves what kind of similarities we see and how we cauterise that as soon as possible in November. A bit of a political ad there, and I know that's not where you come here. But anyways, in other news, the editors of The Opinion Page for The New York Times, James Bennet and the managing editor, I believe he was the managing editor for the Philadelphia Inquirer, both fired for insensitive articles, opinion, op ed, whatever you want to call it, or poor decision making around titles.

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In the case of the Philadelphia Inquirer, the title was Buildings Matter to or Building Building Lives. Basically, a journalist wrote an article about physical destruction of looting, and the editor chose the title Buildings Matter to which was a stupid title and insensitive. And then James Bennett was a little bit more controversial. He posted an op ed from Tom Cotton and they felt that it was just so false, so poorly fact check that it just reflected terrible judgment. And I find this disturbing in the sense that we're in that part of the cycle with a controversy or civil unrest or a movement.

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And this is a movement. And it was overdue. And I would say 90 percent of it is inspiring. But we also run the risk that it's so raw and so sensitive that if you don't sign up for the prescribed orthodoxy of the movement and that orthodoxy is in this instance, either very far right or very far left, again, more polarization. You run the risk of being canceled. And I worry that we are if we don't open ourselves to a dialogue, if we just demand everyone sign up for the most extreme version of our orthodoxy or they're our enemy and deserve to be called out and shamed and cancelled, that we don't invite a constructive dialogue such that we can shape more enduring, lasting change if we don't get moderates, if we don't get people from all points of the political spectrum to have a productive dialogue around what does it mean to actually defund police?

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Do we end up with private militias that rich people control? What does it mean? What does it mean for unions? What are the benchmarks? I think the idea of totally reshaping police forces is super interesting. When I think about London bobbies not carrying guns, I think about UCLA. We had a fairly small police department. The UCPD is what we call them, but we had a much larger community service organization called CSOSA Community Service Officers, and these were young men and women who are students were given a blue jacket and this powerful weapon called a walkie talkie.

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They were mostly used just to escort women around campus at night who were worried about walking alone through kind of dark forest areas of campus. But it was powerful and they had the walkie talkie and they people felt safer. And if they saw something or sensed or observed something that might escalate to danger or crime, they then called the cops. And it struck me as community based policing and very effective and also very cost effective. And when you think about if you think about how we're addressing poverty, how we're addressing mental illness, how we're addressing addiction, we're doing it with police, firearms in jail, and regardless of the morality, just economically, it's just too goddamn expensive.

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So we need to. A rethink. Law enforcement, but when we when the orthodoxy is that all police are bad and that police are prone to violence and that all police are racist, you immediately shut out a large swath of the population that would like to have a constructive conversation around a new approach to policing. And I think we end up with change that is more reactionary and then it dies down. And the people who don't want to do anything or don't want to see change because they're fed up with the extremism of the orthodoxy of either side, just take advantage of our democracy, which kind of lends itself to inertia.

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And they will wait it out and there'll be very little enduring change. And I worry that the firing of people based on one frame in the movie, that is their career as evidence that we are not yet at a point where we can have a productive dialogue around shaping innovation, shaping reform, the results, enduring change.

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OK, enough preaching from the dog, enough howling at the moon.

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Welcome back. Here's our conversation with Dorothy Brown, professor of law at Emory University School of Law and a nationally recognized scholar in tax policy, race and class. Professor Brown, welcome to Prof. Where does this podcast find you? It finds me in my house on Martha's Vineyard in Massachusetts.

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Let's get right into it. It's obviously been an illuminating past two weeks, the protests in the wake of George Ford's death.

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Yes. You know, illuminate much more than just police brutality. Can you provide some context for these protests? And if there's sort of what the underpinnings reflect around the current state of our country and our economy? Yes.

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So I think there's a direct line between the protests and economic inequality. When we think about the overpolicing, that is a function of budgetary decision. Right. So state and local governments decide how much to spend on whatever it is they want to spend K through 12 police. And we've seen buddy that spent on the police are used to overpoliced black Americans. And let me just point out, black Americans are tax payers and are paying into those state and local budgets better than policing them.

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So there is a direct line between racial justice and policing and racial justice and economic inequality. And you're seeing kind of like a liberating moment that people are saying, yes, we saw George Floyd murdered, and that's awful. And we need police reform or defunding police. Right. We also say, but wait a minute, this systemic racism everywhere, it isn't just in the policing system. And that's what this movement has been about. It's been about moving the calls for police reform into virtually every other area that I can think of.

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And we haven't seen that before.

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So let's I'd love to just throw some theses at you and you respond and tell me where I've got to right where I've got it wrong. And that is I think that almost everything around our economic policy is meant to be at its root, transfer wealth from young people to old people. And if you look at young people, they tend to be more multiracial, represent that the minority is about to become the majority, and that the current kind of power structure is all about figuring out ways initially to hold people of color back.

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But now it feels like the best way to do that is just to kind of hold young people back. Do you see any merit in that in that thinking?

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No, not really. And here's what I would say. I'd say the status quo is designed to transfer wealth to white men, old white men. So I wouldn't be limited to just young to old. I would say everything is designed to transfer wealth to old white people. Right. Because if you're saying young to old, then it would suggest old black Americans are benefiting from this. And that's not what we see.

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So I would say everything is designed to maintain the status quo, which is old white guys who have been running things for a really long time, continuing to climb and groom other old or soon to be old white guys to take over when they retire.

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Yeah, that's a it's a fair point. I've often reflected in the 90s when I was starting Internet companies and I was raising a lot of money. And I remember now I look back and think 98 percent of the capital raised that I observed was from a profile and the profile was white heterosexual males. You know, we're all so proud of ourselves in the startup community. We're in Planet Allcott funding that we started funding gay white males. We saw that as really liberal.

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But women were held out of the party and people of color just had. Absolutely they didn't, you know, didn't even know where the address was. It's strange. I'm embarrassed by how natural it seemed or that we didn't recognize it is as unnatural. So it seems like criminal justice or the our approach to prisons policing are absolutely kind of baked in in terms of systemic racism. What are the less obvious means of which there is kind of this underpinning of racism in our society?

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So what's been interesting to me about the reason why I think criminal justice reform issues are easier to recognize is there are videos we don't see video. There's been a black in the ivory for poor black Americans in higher education. There's been hashtag coppicing paid me. So you're seeing now conversations about the publishing industry where you see black authors not getting the advances. White authors are you see black professors talking about their horror stories. Those things are just as evidence. But not material, they're not everywhere, they're not.

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We don't have video, you know, so I would say systemic racism is everywhere. I write about it in the tax system, for example, and most people go, what? Yeah, people don't think about it because the IRS doesn't collect the data. And people think, oh, when we talk about tax policy, we're really talking about poor people. And my pushback has always been you. No, we're talking about racial inequality that isn't just felt by poor taxpayers.

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So you see systemic racism everywhere, but the public doesn't necessarily see it everywhere. But what I see this movement is doing is opening eyes to a lot of white Americans about how widespread systemic racism really is. They may have started this quest with, oh, it's just the policing and we fix the policing will move on. And then we see the debacle in Georgia with their voting yesterday and the pictures that showed if you were in a racially diverse neighborhood, you had tremendous lines, hours and hours of waiting.

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But if you were in a white neighborhood, virtually no line. So there really isn't an area that is immune to a systemic racism analysis.

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Yeah, we had Peter Henry, the dean of my boss from NYU Stern, and he highlighted that if you think about the Republican Party has kind of become the party of old white guys.

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I mean, there's just no there's no way that I think it's pretty apt description. And they are resisting the minority becoming the majority and that they're go to tactic has become voter suppression, that he thinks that is really the biggest issue facing us. They don't want to compete. Their strategy is just to suppress the vote.

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And many of them have been saying the quiet part out loud lately. We don't want to vote in, you know, by mail because then a Republican will never win again. I mean, elected a Republican. Officials have actually said that so suddenly we're not in a democracy.

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Yeah, it's it's it's frightening to think that not only it's there, but it's just so brazen. Let's talk a little bit about tax policy. I've never understood why we don't go back to the Reagan era. And we just have income. We have income that sweat earns current income. We have income that your money earns in the form capital gains.

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And I don't know if it was intended this way, but it strikes me that if when you have white households own the majority of stocks and assets, yes, that effectively what you're doing is you're transferring wealth again from people of color who tend to get the majority of their income from current income taxed at a higher rate and the majority of capital gains income flows to white households who pay a lower rate. I mean, it's not just straightforward transfer from one party to the other.

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Yes, I completely agree with you. And I think the 86 Tax Reform Act that Reagan championed where wages and income from stock were treated the same and it lasted about two years. Yeah, it lasted about two years. Right. Because people were like, no, we should tax capital less. Why? There's really no good reason to tax capital less. It's just that you have to vote, right. So you can get capital less.

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There's been a lot of let's talk about corporate America. There's been a lot recently, a lot of it. And I think you agree with this very performative statements. You know, we stand with George Ford and we are appalled by racism and and we've all, you know, are all white board agrees.

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You know, it's sort of yes. If it very poor form.

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And by the way, I'm guilty of this. I sit on a board and I you know, this is really you were talking about educating white people. And I'm one of those people that's going through an education process. And one of the things I've noticed is I kind of look left, look right. I'm a lot of the corporate boards I'm on and we all look very similar. And we talk about corporate America and what how actions, how the music can match the words.

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How can the action start to foot to the words being put out?

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Yeah, that's that's an excellent question. And I think the first thing and the other, you know, performative statement of Black Lives Matter. OK, so, yes, OK, we've got these corporations saying these slogans. And if you were to ask your employees, do they think the company thinks black lives matter, they would likely say no. So the first thing I would say is, instead of the statement that, let's be clear, statements are important.

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Right. So if I'm a black employee and I'm like stressed because I'm dealing with watching the video, I'm dealing with incidents in my own family, I'm dealing with all this. I like that my employer puts out a statement, but that's step one. Step two has to be what am I doing to root out and eradicate the systemic racism in my workplace? It starts to be with the board. Right. So you need a board that shows Black Lives Matter, not that says Black Lives Matter, but that shows black lives matter.

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So that's step one. You need to diversify your board in a meaningful way. The second thing you have to do, I would say, is listen to your employees. Now, here's the thing. Most of us who work in places, if it's a safe space, they'll tell you, well, why don't we do it this way? But the first time they do it and they get shut down, they don't do it anymore. So if you want to know what's going on.

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If I were a CEO, I would provide a space for anonymous input so that the employee would not worry about being retaliated against.

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And if I were a board who really cared about this issue, I would make the CEO's continued employment conditioned on racial diversity numbers, getting retention numbers, getting up. I would say, in addition to share price, because the share price is important, I would make the CEO accountable for moving us forward. And I'm sure most CEOs are not equipped for this. Right. That they would figure it out, though, right. If their jobs were on the line, they would be incentivized to do better.

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The hard part there, as I just think this through, is when you start. You do disarm unilaterally, I wonder if you need some sort of legislation or regulation because or aid to encourage investors to buy the stocks of companies that are achieving those goals. Because when you place any sort of constraints or regulation or on a board, the fear is that, OK, we're disarming unilaterally. And other companies that aren't subject to the same standards will have an easier time, at least in the short term, outperforming us.

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But maybe maybe at the end of the day, if you're just getting to where the puck is, it's a I see your point and partyism going around.

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So I would you know, here's what I think that's a legitimate pushback. And here's what I would say right now. You're not getting the maximum potential out of your employees. Your employees have great ideas. And when they give them, they get shot down and then they stop giving them. And I think the market would react in a positive way, not a negative way. What CEOs are currently underestimating is how much less they're getting out of their black employees than they would be if they are black employees were empowered to soar.

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And let's talk let's go back to tax policy. What two or three changes could we make to the tax code that would both make a healthier economy and also address some of these systemic issues?

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So first, it's what we talked about, tax income from wages at the same rate as income from capital income. It's income is income. There is no distinction. That's the first thing. The second thing is look at the subsidies for homeownership. I've written about this. I talked about this. Homeownership is a decidedly race based asset. Overwhelming majority of white Americans own homes. They're, you know, a minority of black and Latin Americans own homes. But we have tax subsidized homeownership, which basically means.

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Right. Renters which are disproportionally black and Latino or no transparency. Right. I mean, it's like that. Right? So why don't we examine our and I'd say get rid of them. Our tax subsidies for homeownership. If you care about housing, then let's have tax subsidies for housing. But there's no reason why we should subsidize such a race based asset, especially in light of the government's role in making it a race based asset.

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Yeah, I think that's such a powerful point. The two largest tax subsidies in America are the deductions on capital gains and mortgage tax interest.

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And if you look at them distinctly, this notion that owning a home is the American dream, which is a tagline brought to you by the National Association of Realtors, both both of those tax deductions, the largest the most expensive tax deductions in our society, do exactly what you're talking about, the transfer wealth from one cohort, primarily people of color and younger people to older white people. Talk a little bit about what would you like to see happen if there was regulation in addition to this tax policy we had discussed?

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Can you think of any specific regulation that you think is overdue that would that we need to immediately think about? So part of me thinks the mandate would be transparency that put out require the numbers to be published on websites. What percent of your board is black? What percent of your executives are black? What percent of your workforce are black? And what types of jobs do they hold? Right. So those companies that have a customer base that are very racially diverse.

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Mm hmm. They would be embarrassed and you would see shortly before the due date for the publication of the numbers board appointments announced. That's my guess. Mm hmm. That's what I would say, transparency.

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I've seen some numbers around the number of black executives at Apple, and it's been just sort of shocking. It's sort of rattling. Okay, that that's it. So the firing of there are some high profile firings and, you know, they say they resigned. But let's be honest, they were fired.

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The head of the opinion section, Microfit Crossfade. But let's be honest, that guy just had I don't say he had it coming. That guy just seems to strikes to me like to be an idiot. OK, finally, he was an idiot at the wrong time and he got fired. The head of the opinion section of the editorial page of The New York Times, James Bennett, the editor at the Philadelphia Inquirer, Appetite, Bon Bonapartist.

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Are these do you think these are just these are people that should have been fired and finally were starting to fire white guys when they deserve it, it's overdue? Or is are we in an era where there is quite frankly, if you're over the age of 50 and white and maybe it's time you're kind of walking around with a grenade in your hand with the pin out, is this are these firings overdue or are we in an era where it is just a dangerous where there's just so much emotion and it's so raw that you put out a bad headline and you get fired?

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I think it's overdue and I think you can't fall on your past record as a defense for some of the hardest things that happened, right, for the Philadelphia Inquirer compared buildings to people. OK, well, you know, black Americans, we we were property, right? So really, really, somebody somebody had to tell you that, you know, The New York Times, he published an op ed that basically called for tear gassing and violence against protesters that are going to disproportionately impact black Americans.

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And he doubled down. People forget this. He doubled down. He acted like his black employees were being emotional. And they didn't want you know, they didn't want to hear things they didn't want to agree with. And then he was very dismissive, very dismissive. And quite frankly, had he not handled it like that, he might still have his job. That's the problem. It's the arrogance that comes with these positions. And they're so used to ignoring black voices without consequences.

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You can make a mistake and you can say, I'm sorry, I sincere people will forgive you. But when you double down, we know the apology isn't sincere because your first reaction when nobody was looking, when you thought you wouldn't be accountable was, you know what, you just need to grow up snowflakes in effect. Really, really.

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Let me ask you something more generally outside of this specific issue. We both teach global campuses or big, big schools. And I worry that there is a trend on campuses that if you don't subscribe to a specific orthodoxy that is usually for basically a better term progressive, that the environment is such that it doesn't really foster an open debate or what I think is one of our missions. And that is to provoke. And I worry that some of this I think the term was just great awakening, that it might be stifling dialogue and without a dialogue.

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And I would like to think a campus is a good place to have this dialogue that we never really register enduring change because we have a large cohort that just goes silent and becomes resentful of the fact that there really isn't a market or an arena for open debate, any sort.

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Yes, I have lots of thoughts.

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And my first is I don't think our campuses are all that progressive. And if you've ever talked to black students on your campus, you would know that. So and I'm not saying. Do you? I'm saying people who say this is progressive would know that. So I taught a Ferguson movement course at Emory a few years ago and it was open to every state at the university course, opened to every student at the university. So I had a bunch of undergrads in there.

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And the stories they would tell me about what they're racist white faculty would say in class would make my hair stand on end. So I always pushed back at this notion that there's this progressive orthodoxy because how do you define progressive? Because I would say if there's a progressive orthodoxy, there's a racist progressive orthodoxy and it's an anti black racist. So that's a problem. No. To everybody isn't good at facilitating a controversial conversation. So this notion that all classes ought to be about provoking winds up terrorizing students who look like me, but it really isn't this open debate.

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It's room for someone to say the N-word in class and open for debate. I don't want to hear that crap. So people don't think about the impact on their students, particularly their black students in these places. That's why, you know, every few years you hear black students complaining, hello, we need more black faculty, we need more black administrators, we need more people who can help us. So this brokenness is a myth. I haven't seen it.

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I've been a law professor since 1991. I have never seen this localness. I've never seen this orthodoxy particularly. I want to be specific about anti black racism, that the stories you would hear if you were to ask for them from our black students would be a story not of, oh, I feel so welcomed in the classroom. Oh, my professor made me know. They're like, I'm hiding. I don't want to get called on. I don't want to answer or, you know, I have I've heard of con law professors who were who think they're so clever when they call them the black student to argue against Brown v.

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Board of Ed. Really, that's open debate. That's a fair. And it isn't about well, lawyers have to be able to argue both sides try to pick the blanket, right? You, Professor, we're being very race conscious in that decision. And the student doesn't have a chance to say, you know, we're not we don't empower our students. They know that, you know, most of them want to.

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So question, we always we always like to ask people for advice. We have a very young and a very male viewership. What advice do you have for young people in this? What are the takeaways here? What would you advise in terms of learning, trying to be more thoughtful about this topic, trying to engage in it in a productive way? What advice would you have?

[00:36:06]

Yes, and this is hard for a lot of really bright white males. Be quiet and listen. It was one of the lessons one of my white male students in my Furguson course taught me. He said, Professor Brown, I've learned to be quiet and listen to what the students of color have to say because they have an important perspective. So the first thing I would say is you're not an expert, so read up on it. What do you do when you're not an expert?

[00:36:36]

You read, write, so get a book. Write Fragility is one of the books I've been recommending people to read because the title is Right Fragility. Why is it so hard for white America to talk about race? OK, so step one, do some reading. Step two, if you are as upset about the video as I am, then become an ally and think about once you educate yourself ways that you could intervene on behalf of your black colleagues as opposed to silencing that.

[00:37:11]

Right. So if something happened, somebody tells or forget their black colleagues there in a group and it's just a bunch of white guys and they're joking around and somebody makes a racist joke and you're offended by it, but you don't say anything because you don't want to get kicked out of a social club, decide it's not worth being in the social club if your price is listening to racist jokes. They're little things you can do and there are big things you can do, I'd say start with the little things.

[00:37:37]

Dorothy Brown is a professor of law at Emory University School of Law, a nationally recognized scholar and tax policy, race and class, and has published extensively on the racial implications of federal tax policy. Professor Brown, thanks for joining us and stay safe.

[00:37:53]

Thank you. We'll be right back.

[00:37:59]

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[00:38:25]

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[00:40:44]

All right, we're back as a reminder, I'm here to answer your questions about business, big tech, career advice and education, submit a question by sending a voice recording to office hours at section for Dotcom. Ask us anything. Office hours at Section four dotcom roll. The first question.

[00:41:01]

Hey, Scott, this is Gary calling from Brooklyn, New York. At the beginning of the year, I moved to the city to begin working for an entire tech startup that is majority owned by Global Insurance Corp.. Two months into my rule, it was announced that our parent company would be merging with another large insurance firm. And a couple of weeks following that announcement, the United States began to incur the economic impacts of the crisis that we have yet to achieve profitability.

[00:41:25]

Our company is well on track to exceed investors targets for twenty twenty and we are relatively well insulated from the rest of our parent corporation. Given this context, how do you view the outlook for corporate unsign ventures such as ours? Do you expect many of these operations to be shut down due to concerns? And how does a large corporate merger generally impact these adventures? Thanks a lot to Bob. So thanks, Kyra. So what happens or what how do you assess your prospects when you are part of a small company that's acquired and sounds like you are a fairly new employee to the company, then it was acquired?

[00:42:00]

So this is really situational and it's dangerous to make any blanket statements sometimes. My last firm, L2, was acquired by a large multibillion dollar multinational firm, Gartner, and most entrepreneurs kind of dream of being acquired or going public because they want liquidity. We all claimed that we just want to build great companies and change the world. That's bullshit. Most of us want to just provide or obtain economic security for us and our families, which is a more noble way of saying we want to get filthy fucking rich.

[00:42:33]

But once that happens and there's some liquidity for the investors and for the founders and hopefully for the employees, which is the true test, I think, of whether the founders are kind of creating real value. And is that is to what extent do they create value or wealth for everyone anyways? Once that happens, there's just some basic questions you want to ask yourself. One company that's acquired sometimes there's Khil acquisitions where they buy just to starve it and take a competitor off the market, despite the fact that's not supposed to happen in the DOJ and the FTC are supposed to block those.

[00:43:06]

They have not done anything or have not done their job. And about two decades and there are, I think, a lot of acquisitions where it's not entirely sure what they're going to do with it and they just let it die. And it's sort of if it works great, if it doesn't, we've taken we've cauterise that branch of a competitor. I think it's become a marketplace where it is very hard for small companies to survive. It's you either get acquired or you go out of business and everyone dreams of being acquired by one of the big tech firms.

[00:43:33]

They have their antennae out everywhere. So you're in a you're in and now a division of a larger company. If it was a growth company and they were excited about you, there's tremendous opportunity. And big companies aren't dumb. They want you to be happy and you want to ask yourself the same questions you asked at the company pre acquisition. And that is, do you are you learning you see economic upside? Do you think the industry and the company are poised for growth?

[00:44:04]

What is your opportunity said? Do you have the opportunity to go work for a smaller company again? Are you enjoying it there? Do you have senior level sponsorship? Do you like having a health care plan that is more stable and reliable? Big American companies are still the premier creator aggregator disseminator of stakeholder value in the history of the corporate world. They can be fantastic places to work, but it's situational and one absolute. I am fairly comfortable with this.

[00:44:35]

You need to assemble a kitchen cabinet of people outside of the company and maybe one or two inside of the company that know you but aren't so close to that. They're a bit biased and on a regular basis ask for their advice around your prospects. But typically the way they structure it is they will give you incentive to stick around. Typically, they don't want to buy the company and have the assets all leave, which are usually the people. So what is your vesting schedule?

[00:45:00]

Do you have new options? Are Tzu's. I just sit down and decide, OK, what is my prospects here? I generally say to people, stick around at least 12 to 24 months post acquisition and see if there's opportunity and see how you feel about it. But the fact that your company was acquired is a good sign. It means they probably value this. They bought it for a reason. And there's a lot of opportunity at medium and big size company.

[00:45:27]

We tend to romanticize small companies and not give medium and large size companies there do. So in some. In some do the analysis. You're slow thinking takeover form a kitchen cabinet and then weigh their recommendations against your opportunity set elsewhere. Thanks for the call or thanks for the question. Good tax question.

[00:45:47]

Hi, Scott. Here's an article from Europe. You've repeatedly said that you do not support the idea of platform monopolies, but you still prefer owning their stock. So my question is, where do you see new monopolies coming up and how to invest in them? I wish you best luck with your new podcast. Cheers.

[00:46:07]

Thanks very much, Edgar. So it's hard to identify Monopoly before they happen. And a monopoly isn't as bad. It's a monopoly that uses a monopoly power to increase externalities. The fact that Facebook is the only game in town and social media and they run unfettered and pervert our democracy to press our teens. And all of this is controlled by a thirty six year old who can't be removed from office is dangerous. So monopolies in and out among themselves aren't necessarily bad.

[00:46:34]

It's as if they use their monopoly power to do bad things, bad things. For example, YouTube radicalising young men. That's bad.

[00:46:42]

So new monopolies. I think if you look at companies that are. Coming up or have the potential to be extraordinary and at some point become so powerful that they could have a monopoly like power, you would probably get to something like a Shopify or maybe a sales force, but I don't see that yet. I still think that the monopolies we haven't done anything about them. What I think is a more interesting question. I'm actually thinking, I'm thinking and I've begun.

[00:47:10]

I guess I'm more than thinking of reallocating my portfolio. I don't trade stocks, so I tend to hold stocks for like a decade. So when I buy and sell a stock, it's a big deal.

[00:47:20]

It's a big deal.

[00:47:22]

And I am reallocating my portfolio. I am getting out of big tech slowly but surely not, because I don't think they're great investments. Unregulated monopolies make fantastic sense. But the the size or the law of big numbers is just become so extraordinary. At one point three trillion dollars, if Amazon were to triple or quadruple, it would be the size of, I don't know, the German economy or the Canadian economy. So are we running into companies that have gotten just so big that they don't offer the kind of three and five X opportunity that you like to have at least a couple of in your portfolio to pay for the losers?

[00:47:58]

But I'm moving into a reallocating it to what I'm loosely calling a disruptor class, and that is companies that have so much opportunity because they're accelerating into a weakened ecosystem. What do I mean by that? What do I mean by that?

[00:48:14]

The hospitality industry has been permanently impaired, I think are impaired, not permanently, but for the next five or 10 years with revenue going from, you know, 100 percent or revenue going down 80 or 90 percent of the total industry, the airline industry, that a company like Airbnb that has access to cheap capital is a capital flight strategy, leveraging other people's capital. I see that they're going to have more demand. I think people are going to be more cost conscious about traveling.

[00:48:39]

I think this notion they're going to be scared to stay in other people's homes for fear of the virus is hanging out in the closet, I think is bullshit. I don't think young people think that way. And Airbnb customers tend to skew a little bit younger. I think the supply is going to be greater. I think more people are going to decide to try and monetize these fallow assets called their apartment, which is on, you know, overlooking a plaza somewhere in in Rome.

[00:49:00]

So you can have more demand, more supply. And you have a company that, in my opinion, has sort of a natural moat and could at some point be a monopoly. And that's Airbnb.

[00:49:09]

Other disruptors, I like lemonade. Even more important than the execution of the company itself is just how fat and happy the incumbent industry is trying to disrupt disruptors. And I think the insurance industry is just taking its chin out. Forty five percent of all of your insurance premiums go to profits and administration, meaning that only fifty five cents on the dollar are returned in the form of reimbursements or payouts. I think that is unsustainable. And when I think about the people I know and insurance and how much golf they play and how I don't know.

[00:49:42]

So I think they're good at what they do. But it's kind of this high IQ backslapping kind of white guy industry. And I think it just kind of get tagged and tagged hard. And then I see lemonade. Coming up, a focus on technology, access to cheap capital scaling really quickly. Just filed for an IPO. I think that's a potential disruptor. I like this small company that I've talked about called Public, which is taking it's a trading platform for the purchase and sale of stocks.

[00:50:09]

But I like it because one of the things I don't like about Robin Hood is it encourages young men and women to use leverage and options and kind of spin them or whatever the term is. And I think that is dangerous for young people. And I think public takes a more benign approach to investing in per our previous comments. I think trading is becoming the new gambling and is going to attract an entirely new segment or cohort. And the traditional guys in financial services, whether it's Morgan Stanley or TD Ameritrade or Charles Schwab, they just feel dusty.

[00:50:42]

They feel like Buick. I don't see a twenty five year old that's starting to make some money saying I just got to get I got to get a Schwab account. So I think these companies are poised to do really well. And I like public. And the question is, Will, how do you invest now? There are secondary exchanges or opportunities or platforms where you can go and actually buy these stocks in the private market. And if I can, I'll wait till they're public.

[00:51:07]

But anyways, long story short, I'm thinking about reallocating my portfolio, if you will, out of big tech monopolies, which I think are going to run up against a lot of big numbers and maybe even some regulatory risk. We'll see. And moving into a disruptor class that is going to find a lot of greenfield and room to run as they enter traditional industries that have been weakened by covid-19 but have access to cheap capital, clean sheet design and embrace of technology and a younger employee and consumer base.

[00:51:38]

Oh, my God, that was good. Even for me. Even for me. That was good. Next question.

[00:51:44]

Hi, Scott. I was laid off back in. And now I find myself fortunate enough to be debating two job offers, the first opportunity is with a growing public company where my manager has several decades of experience over me. The second opportunity is with a venture backed unicorn, and the manager is probably two years older than me, and it doesn't seem like someone I can learn a lot from. The compensation in this room is 10 percent less, but it's clear that the ability to climb to higher roles is much greater.

[00:52:12]

My question is, would you take the opportunity to learn from decades of experience in the first rule or the opportunity for rapid career growth in the second? Thank you for all of your regular insight and advice, both personally and professionally hormone.

[00:52:27]

That's an interesting question, Armon. Wow, is it good to be you? So I think that OK, so growth is a tremendous yota, right? And that is to be in a company that's growing really fast, that chaos, that excitement, that buzz, that opportunity to look for new opportunities, the challenges of scale. I think you're just going to learn a lot by virtue of being in a growing company. There's something about having to build new stuff and shut it down fast and the experimentation and the excitement of growth that is intoxicating.

[00:52:59]

So if you have the opportunity to go to a venture bad company, it's high growth at similar compensation than a traditional company. I would probably do that. I think that's an exciting I think going into a strong venture backed companies in the midst of a recession and hope that we come out of a recession as opposed to digress into a depression is an interesting place to be. Also, it sounds I got the sense Armaan that you're a young man and you're a little bit more risk aggressive.

[00:53:30]

If you haven't collected spouses and dogs and kids yet, you can take more risks. So it just feels to me like this is probably the time to take a little bit stronger, cut at the ball and go with the small company with similar compensation. And it's growing fast and I think it's a very thoughtful comment. So you appreciate working for someone much older than you. But I think that, again, pulled together that kitchen cabinet outline just as you did the opportunities in greater detail and get other people's opinions.

[00:54:01]

Employ your kitchen cabinet and your wisdom of crowds here and oh, my God, is it bueno to be Armont, which in English means it's great to be awesome and congratulations. What a great position for you to be in that office hours.

[00:54:16]

Again, please submit a voice recording to office hours at Section four dotcom.

[00:54:31]

I was aware of happiness Episode 13 have been thinking a lot about scorecards. There's a common saying in business, what gets measured gets done. And I think as any manager, you want to sit down and decide what is success look like and how do we measure it so that we can have an open, honest conversation around whether or not we're getting the return on invested capital. We need on our efforts. And we talked about this earlier in the show.

[00:54:57]

I think the Nasdaq is one of the unhealthiest metrics in the world because it creates this illusion of prosperity. The wallpaper's over just how fucked up America is right now and how much pain there is out there, because, yay, Apple is up. Scorecards can also be incredibly stressful, and that is one of the things I'm thinking about doing, I'm actually transitioning some of my capital out of investments in the public markets into the private market, specifically into real estate.

[00:55:27]

And I find that one of the reasons I like owning real estate is that there is no scorecard, or specifically this scorecard is much more opaque. And that is my real estate holdings have probably declined in value and I own a lot. And so it's probably off 20 percent in the last six months. But I don't I don't have a flashing red number every day. I'm at a stage in my life where I don't get the same thrill of kind of gambling and seeing a score card as I used to do with stocks and the stocks I own.

[00:55:57]

I just checked too much and my mood is too dependent upon that score card. And I want to divest away from that score card. And even if it means investing in assets where you don't have a daily scorecard. And by the way, supposedly, according to Cliff Clip from think it's from dimensional advisors and a great investor who says that if you can invest for the long term and you don't need liquidity and you can be more subject to volatility and you don't need the transparency of a scorecard, you should get higher returns over time.

[00:56:24]

I think that's kind of the basis of why private equity continues to over perform other asset classes, in addition to the fact that they just lever up like crazy with cheap debt or an environment with incredibly cheap debt.

[00:56:35]

Anyways, I've been thinking a lot about scorecards as it relates to our relationship. And what I'm going to ask you to consider doing is put the scorecard away. And it's something I have struggled with my whole life, and that is I have measured relationships as a transaction. What am I getting from this relationship relative to what I am giving?

[00:56:56]

And if I'm not getting more than I'm giving, then I'm dissatisfied or will consider exiting the relationship or expressing dissatisfaction, which is usually a downward spiral. And here's the problem with the scorecard. We have a natural tendency to inflate our own contributions to the relationship and minimize the other person's contributions to the relationship. And as a result, it's very easy to fall into a sense or to have a scorecard that really isn't an accurate depiction of what is going on.

[00:57:28]

In addition, your vision of the scorecard or your perception of the scorecard is largely or as many times going to be heavily influenced by your body chemistry that day and whether you had lunch and what is going on in other parts of your life. We have a tendency to project our problems from other parts of our lives on our key relationships. And what I have generally found is when my friends are really dissatisfied with their relationships, the first thing I ask is, well, what's going on with the rest of your life and are you projecting that disappointment and that anxiety on your relationship?

[00:58:04]

So I think it's healthier to put the scorecard away and ask yourself a basic question. What kind of friend do I want to be? What kind of son do I want to be? What kind of wife, husband, boyfriend, girlfriend, co-worker do I want to be?

[00:58:19]

And if the relationship gets really one sided and you feel as if you're not being appreciated, then you'll know that and you'll know or make a judgment call around when to exit the relationship. But having a constant scorecard is unhealthy and it's not very unsatisfying. The most rewarding relationships are the one where you tear up the scorecard and just say, I'm going to go all in on this and you're going to paint a vision for the person you want to be in that relationship.

[00:58:46]

I kept a scorecard for a long time with my dad. My dad is not a high character person, and I think a lot about the fact that my dad basically left my mom and me when we were very vulnerable, you know, emotionally, financially. And I've kind of never, you know, not kind of I've never forgiven him for it. And I decided about, I guess, about twenty years ago to kind of put the score card in the bullshit aside and just say, what kind of son do I want to be?

[00:59:14]

I enjoy his company. I think he's a much better dad to me than his dad was to him. He was abused as a child. His mother stole, stole from him, literally stole money from him. And he's been a much better dad to me than his dad was to him. And I think at the end of the day, if you talk about evolutionary progress, the key box we all need to check as men is to be better dads to our sons and our dads were to us.

[00:59:41]

And for some of us, that's a high bar because there are so many wonderful dads out there. But I put away the scorecard and I've had a much better relationship with my father. I just put the bullshit aside. I put the scorecard away and just started being the son that I envision. That doesn't mean I've gone all in. I'm not as good as son to my father as I was to my mother. There was a level of love and commitment and loyalty to my mom that was just singular.

[01:00:05]

But I have decided I'm not going to measure what I give to my father in the context of what I did or didn't. Seemed to him and just remember that he was a much better father to me than his dad was to him, and live up to my impression of miners are what kind of son I want to be. Let's put away the scorecard. Our producers are Caroline Chagrinned and Drew Burrow's, if you like what you heard, please follow, download and subscribe.

[01:00:31]

Thank you for listening.

[01:00:33]

We'll catch you next week with another episode of the Proff show from Section four and the Westwood One podcast network.

[01:00:48]

So this is what is your brain look like on drugs or this is what the dog's brain looks like on no breakfast and a little bit of coffee?